Author Topic: Help Me Figure Out Where to Cut Back on My Crazy $11,000 Monthly Spending Budget  (Read 8243 times)

Jadambomb

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Some things to keep in mind:
1. Both my wife and I work full time and I have two kids under age five.  I live in MA and the childcare costs are crazy here.  My wife also insists that our kids go to a paid-preschool at age 4 (this year) instead of having them at home with the Au Pair, for social interaction reasons.  Besides that, an Au Pair is by far the cheapest care we could find for two kids. 

2. I use monthly averages for my budgets, and some of them are allowances rather than spending per se.  (like Car replacement allowance fund, and Home maintenance fund)

3. Health Care Costs come out of our HSA and therefore are not included on this.  We typically have more than enough in our HSA to cover. 

It comes out to about $11,000 a month which is INSANE, but IS roughly what we've averaged the last few years.  I know we can cut a few things.  Let me have it. 

All budgets are MONTHLY

Auto Related - Roughly $740
1. Car Insurance (Two cars, both paid off. Three drivers. 1. 2008 Lexus RX 350  2. 2012 Kia Optima Hybrid) - $148
2. Car Replacement Allowance Fund - $200
3. Car Wash/Tolls/Parking - $20
4. Excise Tax and Registration - $18
5. Gas - $200
6. Maintenance and Repairs (This might include one large repair bill of $1000 per year or so.  Something always happens) - $150

Bills/Utilities - Roughly $480
1. Electric - $210 (includes heating (heat pumps) and a/c)
2. Firewood - $50 (roughly two cords of wood)
3. Heating Oil (for hot water and backup for heat pumps) - $140
4. Mobile Phone - $99 (Unlimited data because my work doesn't have WiFi)
5. Sewer - $35
6. TV/Internet Service (no cable. Internet service for $40 and $8 for Hulu) - $48

Business Related Expenses - $35
1. Assistant Bonus (I work in an office with an assistant and like to give her a bonus at the end of the year) - $35

Entertainment - Roughly $175
1. Guests/Entertaining (This includes backyard bbqs, birthday parties for the kids, dinners if guests come over.  Keep in mind that one party for kids might cost $400 or so with food and booze) - $75
2. Netflix - $11
3. Music/Spotify - $10
4. Special Occasions (Dinner for my wife's birthday, Valentines Day, my birthday, Anniversaries.  One dinner might be $200) - $75

Fees - $99 annually
1. Amazon Prime - $9

Food & Dining - Roughly $1,550
1. Coffee Shops (We make coffee at home everyday.  We might buy a coffee once a week.) - $25
2. Groceries (Three adults including the Au Pair, Two boys under five) - $1,150
3. Liquor - $60 (I'm trying to cut back)
4. Restaurants (We order out once a week for three people, and might go out to a restaurant once a month) - $275
5. Work Lunch (I almost always bring lunch to work) - $20

Gifting - $50
1. Gifts (kids birthdays, eachothers birthdays, friend's kid's birthdays) - $50

Health - $35
1. Pharmacy (Medicine, Sunblock etc.) - $35

Home - Roughly $4,400
1. Furniture/Appliances allowance/replacement budget (This would mean $480 per year) - $40
2. Home Improvement allowance budget (My wife wants to continually upgrade our house.  This would mean one $12,000 project per year) - $1,000
3. Home Maintenance Allowance Budget (Oil Boiler Maintenance, A/C Servicing, Roof replacement every 20 years, House Painting every 10 years or so) - $325
4. Home Supplies (TP, Papertowels, batteries, cleaning supplies) - $150
5. Lawn & Garden (One fall cleanup, a few bags of organic fertilizer.  I do everything else myself) - $50
6. Mortgage (R/E Taxes and Insurance = $850, Mortgage payment = $2,000) = $2,850
7. Pest control Service (We live near a lot of woods) - $29
8. Snow Plowing (Huge Driveway) - $40

Kids - Roughly $2,550 (This should drop down drastically after our youngest kid goes to Kindergarten and we no longer need an Au Pair or Pre-K)
1. Au Pair and Pre-K (roughly $1800 for AU Pair and $575 for Pre-K) - $2,375
2. Kids Activities (Soccer, Dancing, Taking them to Children's Museums, the Zoo etc) $75
3. Kids Supplies - (Diapers/Wipes/Clothing/Toys) - $100

Personal Care - $110
1. Beauty/Grooming (Birchbox, Razor Heads, Shampoo, Soap, Lotions etc.) - $25
2. Dry Cleaning - $15
3. Hair Cuts (For my wife, me, two kids) - $50
4. Mani/Pedi (One every two or three months) - $20

Pets (One cat with Hyperthyroidsim) - $60
1. Pet Food & Medicine - $45
2. Veterinarian (Once per year) - $25

Shopping - $115
1. Clothing (For me and my wife) - $115

Taxes - $7
1. Tax prep fee(Turbotax) - $7

Travel - $425
1. Travel/Vacation (Flights, hotels, gas, food, etc.  This would be $5,100 per year) - $425

Miscellaneous/Everything Else - $100
1. Misc. - $100

That's it!  Looking forward to hearing everyone's thoughts.





« Last Edit: June 20, 2018, 02:54:40 PM by Jadambomb »

Nick_Miller

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Do you have any specific goals you want to hit? What is your current savings rate? Assets versus liabilities? That would give us a better view of your financial picture.

I mean, house and kids are almost $7000 of your $11000, so those are obviously the issues. One will go down soon, and the other won't.

Besides that, I don't really see anything insane. No car notes. No credit card balances to pay off. Since I'm guessing the childcare stuff is non negotiable, at least for your wife, then I'd look at that $12,000 yearly house sinking fund. It's not ridiculous if you own an older home (roof, windows, siding, etc., I know it adds up), but are you actually spending this money or setting it aside like in a sinking fund?


reeshau

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You certainly have a lot of nice-to-haves.  But why do you want to cut them?  Meaning, you have not stated your goal in doing so.  Otherwise, you are just "sacrificing," with no emotional payback for it.

Kudos to you for including saving / replacement accounts in your budget.  I think a lot of people would just lump it into an emergency fund, or call it savings.

In addition to goals, you also don't state your savings / net worth.  You have given a cash flow statement, but no balance sheet.  I think a lot of input would come if you have the above scenario, and state you have no retirement or college savings.  That might make the emergency foe you.

Yankuba

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I think you should be able to make headway on the groceries. I am a family of four and we are at least $500 less than you. Buy on sale, use coupons, don't have meat with every meal, try out Trader Joe's or Costco, etc.

Jadambomb

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We'd love to FIRE by around age 45 or so.  That's really our only goal.  We are 38 now.  Assets vs liabilities I think we are doing decently well. 

Assets:
1. Our house which probably worth about $900,000
2. Investments - $967,000

Liabilites:
Mortgage - $371,000  and that's it. 

Our "Take Home Pay" as calculated using MMM's method is about $14,500 per month and our "spending" as calculated by MMM is still right around $11,000 per month, so our savings rate is about 24.2% which I think is decent.  But it still seems ridiculous to me that we spend $11,000 per month.  But you're right, the kids and house are the two main things there. 

That $12,000 "Home Improvement Budget" doesn't even include the roof stuff, windows, etc.  The $12,000 per year is more like "make house nicer budget" like re-doing the bathroom, or for example my wife wants a nice big patio next summer which was quoted to us around $15,000.  So it's more like one $12,000 home improvement project per year.  Hopefully those things taper off over time as well, but I know she wants a lot of things done over the next few years. 

The roof, siding, windows, painting etc budget is theoretically being accounted for in the "Home Maintenance Allowance Budget" at about $325 a month.  So far, we haven't needed to do anything major like that but I know we will need to replace our roof and windows and repaint our house sometime in the next few years.  That number might actually need to increase now that I think about it...

Thanks for your feedback.  Let me know if you think of anything else!


marcela

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Could you hold off on the house remodeling until the kids are in school and use what you had been spending on pre-k/ au pair to fund that stuff?

Jadambomb

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Not a bad idea actually.  That would only be another 3 years and then we could kind of shift that one budget into the other.  Definitely a good suggestion (provided my wife is cool with that.)  I'll talk to her about that.  Good one.  Thank you!

marcela

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It's killing me to say this with a $11k monthly budget, but it seems you are severely underbudgeting for your pets. $720/year for a cat with hypertyroidism seems low. Do you never board the cat or pay for pet sitting when you go on vacation? Do you have a plan in place if kitty needs a dental or needs to go to the emergency vet?

kei te pai

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How interested in early retirement is your wife? Could you show her how that home improvement money could be life improvement money instead?
FIRE may remove some of that "I work so hard, we earn a lot, I deserve all the nice things" thinking.
If you are moving toward a bigger goal, postponing cosmetic changes should not be too painful.
Have you a shared vision of what life after work looks like?

Jadambomb

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We never board the cat.  We don't go away that much.  Maybe once or twice a year for a week max.  Our Au Pair or friends feeds and gives medicine when we are away.  The medicine comes out to be about $25 a month or so.  No plan in place for dental or emergency but we do have a lot in savings so we can always take from that.  So far, (knock on wood) it hasn't happened.  But I definitely see where you are coming from.  I could perhaps increase those pet budgets to account for those emergencies but then I'm going the wrong way!  Lol.  Something to think about though. 

Jadambomb

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Yeah my wife is definitely not QUITE as into FIRE as I am.  Not because she doesn't love the idea.  But more because she really feels like it's almost a fantasy which we won't achieve for a long time.  I mean as of right now, we are about 1/3 of the way there.  Spending $11,000 we'd need almost $3M in investments, and we have almost $1M.  So it seems so far away. When she talks about these huge house improvements, I'll say things like "Well do you want a nicer kitchen, or would you rather retire two years earlier?" And she'll kind of just say "I want both."  I try to convince her it's one or the other.  I should probably show her something more concrete.

kei te pai

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I would encourage you to read some of the insightful posts on the forum about getting your spouse on board with FIRE.
I can't post the link from this device, but it is worth hunting out.
Honestly, no budget revision will make as much difference to your progress as having your wife fully involved.
And surely the monthly budget you will need in retirement will not be $11,000?

marcela

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I would encourage you to read some of the insightful posts on the forum about getting your spouse on board with FIRE.
I can't post the link from this device, but it is worth hunting out.
Honestly, no budget revision will make as much difference to your progress as having your wife fully involved.
And surely the monthly budget you will need in retirement will not be $11,000?
Just by having the house paid off and the kid's expenses gone, the monthly budget goes down around $4.5k. I imagine groceries will also be much decreased.

Jadambomb

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Good point regarding getting my wife on board.  I will definitely look those posts up. 

And you are right, after FIRE my calculation is we would need more like $8000 per month because we wouldn't have to pay for Child Care and a few other work related expenses would drop. 

PharmaStache

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You spend $400 on a party for kids that has booze?  That's the only thing that jumped out at me.  Do you have college savings set aside?  Housing & kid expenses should decrease in retirement (house paid off, kids not needing care...unless you start putting them in activities and private schools that are even more expensive!).

Jadambomb

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Yeah so I might have a party for my kid, but also provide some food and booze for the adults.  I bought a couple cases of good beer and two handles of liquor for a pretty big party for when my kid turned one.  I invited all my friends and their kids and also provided the food.  So all in all it might have been around $400 for everything. 

We have two 529s setup for each of them and contribute $100 per month to each for their college savings. They also have an UTMA each, worth about $15,000.

You're right about expenses dropping down after retirement, but if we really want to FIRE around age 45 (which we definitely are NOT on track for right now), I'll still have a mortgage, and still be buying lots of food for my two growing boys living at home.  No plans to send them to private school so that's a plus. 

Bracken_Joy

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I mean... how much do you want face punches? Because there IS a ton you could cut down, significantly. But do you really want to? Are you trying to see what's possible? What's your savings goal for being FI? You said you wanted to be FI in 7 years, right? Generally, for calculating your FI number, you do NOT count home equity as part of your stash, since it isn't bringing in returns. (Unless you plan to move and rent when you FIRE, but then you need to adjust your projected spending).

Correct me if I'm wrong someone, but at $8/month projected in retirement, that's $96,000/yr, which is a $2.4M stash, right? So you have 7 years to get another $1.4M. Maybe play with this calculator some: http://www.cfiresim.com/

NoraLenderbee

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You have $17K per year for nonessential home improvements and vacations. You're also at a stage in life where kids are costing a lot. I understand your wife wants a nicer house, etc., but she and you have to talk about why you have to have everything *now*. Put off home improvements for a few years. Keep vacations modest--your kids are young enough to have fun playing at the beach. And honestly, private pre-K AND an au pair? Kids get socialized being around *people*; they don't have to be around other *children* every day.

ysette9

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We have money dates in which we have ended up having an on-going conversation about what our hopes and dreams are for the future. What we would like to do, where we would like to be, who we want to do those things with. Taking through those dreams has gotten us on the same page of what is really important to us. From there making decisions about what to do with our money was a natural extension of the values and goals we had identified. So I would recommend starting there.

I would recommend asking your wife to dream out loud about what she would like to be doing. If you could build your life in any manner possible, what would it look like? What brings you joy? Use that as a starting point to eventually get to the idea of FIRE (or not, if she doesn’t value that). Figure out what makes her tick and speak to those values.

diapasoun

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People have already addressed the biggest problems you have in terms of long-term budget size, which are mostly the house (the home improvements budget!) and making sure your wife is really on board. The au pair cost eventually going away will also help, of course.

The other thing that I see is just a sort of general proliferance of luxuries. Most of your individual line items aren't ridiculous. They're generous, but not ridiculous. However, you have a lot of them. You take vacations, you have your kids in activities, you update your house a lot, you throw what I'm assuming are some very nice parties and you spend cash on clothes and grooming and liquor. None of these things are bad -- they're all really fun! -- but as you have experienced, it adds up.

If I were you, I'd look at all these categories and ask yourself if your spending fits with your values and priorities. Really sit down with and ask yourself tough questions, and then change your behavior accordingly. (If you're interested in this, pick up Your Money or Your Life from the library; there's some excellent stuff in there regarding values-based spending.)

I'll pick some individual nits here, because sometimes it's nice to have things that you can optimize in the short term (unlike housing) and which will likely involve less spousal discussion than the home improvements. Overall, I think you can probably lessen spending in most of your categories by just being generally conscious of your spending, but these ones stand out to me:

1. Gas. $200 a month, especially when you own a hybrid, is a lot. When I was car-commuting almost two hours a day, I spent about $100/month for gas. I have a 2009 sedan with decent-but-not-awesome mileage and pay California gas prices. How are you spending this much on gas? What could you do to cut that down?

2. Do you get the $99 in savings off Amazon Prime? If not, cancel it. Sub-note -- Prime, Netflix, and Hulu is quite the combo of subscriptions. Do you really use all of them? Get rid of what you don't use much; if you really really miss it, you can always re-subscribe.

3. Do you really need unlimited data? You say you have it because your work doesn't have wifi; how much are you using the internet on your phone at work? Note that if you're bored at work all the time and wanting to be on the internet, you may have even more reason to push for FIRE (and a new job).

4. Your food spending is fairly heavy - your grocery spending is nearly $300/week. Bulk buying is your friend, as are beans and whole foods. ;) For its cost, a carrot is way more satiating than e.g. Goldfish.

5. Your entertainment spending is high. $400 for a kids' party? That one is mind boggling to me. When I was 5, pretty much all I wanted for my birthday was cake and time to run around screaming with my friends. (Come to think of it -- that hasn't changed much almost three decades later.) How much of this spending is to please the kids and yourselves, and how much is to keep up with the Joneses? (Same q: regarding entertaining guests at home.) Is the opinion of the Joneses really worth that much?

6. Travel: $5100 a year is a lot! Why not try camping? A staycation? A visit to a city that's within driving range? AirBnB instead of a hotel? There's tons of ways to lower these costs and have a really wonderful time travelling together as a family.

fuzzy math

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Your housing budget is fairly out of control. Even if you wanted to retire at 45 you'd likely be looking at needing to move just to escape some of the costs. You definitely have a different vision of life than your wife and it would be the most helpful thing if you did sit down together and find out what her priorities are. You can have lots of things, just not everything all the time. If you were looking to relocate, renovating your home is likely not a wise financial option. Its definitely outlandish now as it is. Sometimes people choose to make constant changes because life is tough, and changes are something that helps break up the monotony of day after day after day at work.

Your food budget is crazy. Is your AU pair shopping and cooking for you? There are 2 different types of shoppers. One goes to the store weekly or a couple times a week and buys staples for the week based off what's on sale and a reasonable rotation of the same items. The other says "I want chicken basil pasta with asiago cheese and some French green beans". Then they go to the store, and buy exactly the items required for that meal to the tune of $40. Repeat the next day. Your budget says that is what you're doing (or roughly the equivalent). You should be able to halve that with some dedicated lifestyle changes - no whole foods etc. there was a blogger in your area (now has moved) called frugal woods and she always spoke of the cheapness of Market Basket (or some other similarly named store). Shop there.

There is no reasonable amount of use that would require you to use $200 of toilet paper, paper towels, razors and shampoo. You really need to evaluate what you are doing here. $17 of toilet paper or paper towels lasts us 3 months with 5 in our home. Birch box seems to be one of those trendy poor value subscriptions. $6 in delivery razors should last a month.

When you host a party at your home, expect your friends to bring over a 6 pack of beer. Buy some cheap meat and cook it. We cooked for 13 ppl the other week (including booze) for $60. Friends brough additional booze, chips and a cake. People who refuse to contribute are mooches and shouldn't be invited to your home. If you are hosting 100 people in your home, you should cut back. Let the Joneses have you over.

Child care costs do suck. When your oldest is in pre-K is it possible to have an additional child watched by the AU pair to help share costs?

You've done really well listing all of your expenses. At least you see where your $$ is going currently. That's part of the battle. The next big thing is going to be focusing on cutting back without any discernible decrease in life enjoyment.

red_pill

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@Jadambomb - were we separated at birth? Are our wives clones of each other? I am in almost exactly the same boat as you - to within a few dollars overall. I feel the exact same way - We arenít financial disasters in that we have good income and a half decent savings rate (by normal sucker standards anyway) but I canít beleive how much cash we blow even though no one area is out of control.   For us, itís the death of a thousand cuts.  But sometimes I feel like a schmo for cutting things even though ďwe can afford itĒ.  But, my mind is set and I will not be deterred.

What Iíve found so far is my best way due to reluctant wife (same as yours. Seriously they could be sisters by the sounds of it) is to focus on steady progress.  Iterative change that gets slowly accustomed to. I also focus mainly on my own individual spending that I control and arenít family decisions.  That seems to have worn off a bit in my wife.

Also, through hours of conversation we finally have our ďwhyĒ.  For years I would hit the roadblock of her saying our pensions are good and when we retire our expenses will go down.  How could I counteract that?  I pitched the idea of a mini retirement. 3 months exploring New Zealand next year and then in three years we do a full year...somewhere.   Ohhhh she bit hard on it!  We are still building our frugality muscles, but itís getting easier.

If I may (and Iím no expert but maybe just from a fresh set of eyes), offer a few specific suggestions.

1.  Your electricity is high.  Even if you pay $0.15 kWh your at 46 kWh per day. Mine used to be the same. No joke Iíve gotten mine down to under 10 kWh per day.  Itís doable. Turn off the heat dry on your dish washer.  Install a clothesline this weekend. Kill your vampire drain.  Iíve cut my bill in over half by doing these things.  Sure itís ďonlyĒ $50 a month savings - seemingly insignificant in a budget of $11,000 but Iím convinced those small changes add up. Not only dollar wise but also habit wise and by changing the way I look at my spending.

2.  Why is your au pair so much?  Our au pair (told you - clones) is live in from Germany and we pay her $150 a week during the school year and $250 during no school weeks.  My wife also insisted on the pre-K programming.  I didnít buy it - itís not as if my kid would have been an antisocial sociopath because she didnít go to a pre-K program.  I lost that argument.  Avenge me by winning it now that itís your turn.

3.  Dude, $400 for a kids party for a one year old isnít a kids party. Itís an adult party and itís crazy unless you are celebrating something awesome. .  You're the guy who buys everyone a round at the bar.  Cool guy to know, expensive guy to be. 

4. You got Hulu, Spotify, Netflix, prime, etc. Death of a thousand cuts.  Thatís a lot of entertainment.   You got rid of cable and I bet you donít miss it (we are the same - got rid of it way before found MMM).  You wonít miss half this other shit either.  Watching tv is lame. Cut it.

5.  Pest control?  What the hell kind of woods do you live by that there are legions of pests invading your home?   Iíd say unless you are actively fighting some sort of infestation thatís probably a waste of money.  Kinda like an alarm company - false sense of security.  Go buy some rat traps or whatever and DIY.

6. Youíve listed restaurants, special occasions, coffee shops, and guests/entertaining as separate categories. That might make them easier to justify but when you add them up itís almost $500 a month.

7. The big house projects is the big one.  I fight the same battles. We sure do have a sweet patio, and great landscaping, etc etc. But looking back Iíd rather the cash.

8.  We are fighting high grocery bills too.  For the last month weíve been making a weekly menu and shopping off a list.  No coupons or anything (yet) and already itís reduced by about 15%. I recommend this. Itís worked so far for us but still have a long way to go.

Just a few things that jump out at me.   Before anyone calls me out on my hypocrisy, I must say youíve motivated me to dig in and hit phase 2 of our plans. 



Jadambomb

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People have already addressed the biggest problems you have in terms of long-term budget size, which are mostly the house (the home improvements budget!) and making sure your wife is really on board. The au pair cost eventually going away will also help, of course.

The other thing that I see is just a sort of general proliferance of luxuries. Most of your individual line items aren't ridiculous. They're generous, but not ridiculous. However, you have a lot of them. You take vacations, you have your kids in activities, you update your house a lot, you throw what I'm assuming are some very nice parties and you spend cash on clothes and grooming and liquor. None of these things are bad -- they're all really fun! -- but as you have experienced, it adds up.

If I were you, I'd look at all these categories and ask yourself if your spending fits with your values and priorities. Really sit down with and ask yourself tough questions, and then change your behavior accordingly. (If you're interested in this, pick up Your Money or Your Life from the library; there's some excellent stuff in there regarding values-based spending.)

I'll pick some individual nits here, because sometimes it's nice to have things that you can optimize in the short term (unlike housing) and which will likely involve less spousal discussion than the home improvements. Overall, I think you can probably lessen spending in most of your categories by just being generally conscious of your spending, but these ones stand out to me:

1. Gas. $200 a month, especially when you own a hybrid, is a lot. When I was car-commuting almost two hours a day, I spent about $100/month for gas. I have a 2009 sedan with decent-but-not-awesome mileage and pay California gas prices. How are you spending this much on gas? What could you do to cut that down?

2. Do you get the $99 in savings off Amazon Prime? If not, cancel it. Sub-note -- Prime, Netflix, and Hulu is quite the combo of subscriptions. Do you really use all of them? Get rid of what you don't use much; if you really really miss it, you can always re-subscribe.

3. Do you really need unlimited data? You say you have it because your work doesn't have wifi; how much are you using the internet on your phone at work? Note that if you're bored at work all the time and wanting to be on the internet, you may have even more reason to push for FIRE (and a new job).

4. Your food spending is fairly heavy - your grocery spending is nearly $300/week. Bulk buying is your friend, as are beans and whole foods. ;) For its cost, a carrot is way more satiating than e.g. Goldfish.

5. Your entertainment spending is high. $400 for a kids' party? That one is mind boggling to me. When I was 5, pretty much all I wanted for my birthday was cake and time to run around screaming with my friends. (Come to think of it -- that hasn't changed much almost three decades later.) How much of this spending is to please the kids and yourselves, and how much is to keep up with the Joneses? (Same q: regarding entertaining guests at home.) Is the opinion of the Joneses really worth that much?

6. Travel: $5100 a year is a lot! Why not try camping? A staycation? A visit to a city that's within driving range? AirBnB instead of a hotel? There's tons of ways to lower these costs and have a really wonderful time travelling together as a family.

All good points.

1. $200 for gas does seem high.  Especially because I drive the Hybrid to work everyday and I work nine miles away. My wife works from home 90% of the time.  The one main thing here is that my Au Pair drives a ton. Almost every night she takes the car and goes out with friends.  Sometimes she goes to places that are fifty or sixty miles away.  I just recently told her if she's going to be doing anything more than twenty miles, she should put some gas in the car.

2. We do save $99 from Prime in a year but you're right, to have Hulu, Netflix and Prime is probably overkill.  We do use all of them but I'm sure we could cut one out.

3. I might be able to look at not having unlimited data.  My work blocks almost everything so I do use my phone a lot at work.  I probably should cut down on that and maybe I can cut out unlimited data.

4. I totally agree here about the food budget.  I literally have no idea how we spend this much but we usually shop once a week and it's around $275 or so.  I have two kids who love those fruit/vegetable "pouches" and can eat several of them a day.  And because it's fruits and vegetables we usually let them because they generally are picky and won't eat whole fruits or vegetables.  Those packets cost $1.09 or $1.19 each and I'll usually buy around 40 a week so that's almost $50 a week right there. My wife doesn't really look at prices.  She buys organic a lot and buys lots of berries which are expensive per calorie.  We should definitely start doing Costco or something along with generally being better about watching prices.

5. Yeah you're right about this one too.  $400 does seem high.  In truth, that was more of an adult party veiled as a kids party but I'm sure I could have done that cheaper.

6. Also good point about travel.  Just keep in mind that if we take two trips per year with flights, and spend $350 per plane ticket on four people, that's $1400 for airfare per trip.  Or $2800 per year.  Then, I include ALL of our food, gas, lodging, rental cars in that budget too so it can add up quickly.  But definitely good point about camping and doing cheaper stuff.  I actually love camping so no skin off my back there. 

Jadambomb

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I mean... how much do you want face punches? Because there IS a ton you could cut down, significantly. But do you really want to? Are you trying to see what's possible? What's your savings goal for being FI? You said you wanted to be FI in 7 years, right? Generally, for calculating your FI number, you do NOT count home equity as part of your stash, since it isn't bringing in returns. (Unless you plan to move and rent when you FIRE, but then you need to adjust your projected spending).

Correct me if I'm wrong someone, but at $8/month projected in retirement, that's $96,000/yr, which is a $2.4M stash, right? So you have 7 years to get another $1.4M. Maybe play with this calculator some: http://www.cfiresim.com/

Face Punches welcome. 

I did not count the equity in my home as part of my stash.  We have $966,000 in investments right now including 401ks, IRAs, brokerage accounts, etc. 

Yes you're right about the $8,000 per month equaling $96,000 which is a 2.4M stash, but I'm using 30X my annual spending as my FIRE goal, because if you plan on FIRE with higher incomes and spending, you really need to start taking taxes into account. 

red_pill

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Re the au pair driving - you already pay her for her wages (a lot compared to the going rate here) and food and acccomodations, so why is unlimited car rights included?  We charge ours 20 cents per km and that is pretty standard practice for people with au pairs around here. 

Jadambomb

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@Jadambomb - were we separated at birth? Are our wives clones of each other? I am in almost exactly the same boat as you - to within a few dollars overall. I feel the exact same way - We arenít financial disasters in that we have good income and a half decent savings rate (by normal sucker standards anyway) but I canít beleive how much cash we blow even though no one area is out of control.   For us, itís the death of a thousand cuts.  But sometimes I feel like a schmo for cutting things even though ďwe can afford itĒ.  But, my mind is set and I will not be deterred.

What Iíve found so far is my best way due to reluctant wife (same as yours. Seriously they could be sisters by the sounds of it) is to focus on steady progress.  Iterative change that gets slowly accustomed to. I also focus mainly on my own individual spending that I control and arenít family decisions.  That seems to have worn off a bit in my wife.

Also, through hours of conversation we finally have our ďwhyĒ.  For years I would hit the roadblock of her saying our pensions are good and when we retire our expenses will go down.  How could I counteract that?  I pitched the idea of a mini retirement. 3 months exploring New Zealand next year and then in three years we do a full year...somewhere.   Ohhhh she bit hard on it!  We are still building our frugality muscles, but itís getting easier.

If I may (and Iím no expert but maybe just from a fresh set of eyes), offer a few specific suggestions.

1.  Your electricity is high.  Even if you pay $0.15 kWh your at 46 kWh per day. Mine used to be the same. No joke Iíve gotten mine down to under 10 kWh per day.  Itís doable. Turn off the heat dry on your dish washer.  Install a clothesline this weekend. Kill your vampire drain.  Iíve cut my bill in over half by doing these things.  Sure itís ďonlyĒ $50 a month savings - seemingly insignificant in a budget of $11,000 but Iím convinced those small changes add up. Not only dollar wise but also habit wise and by changing the way I look at my spending.

2.  Why is your au pair so much?  Our au pair (told you - clones) is live in from Germany and we pay her $150 a week during the school year and $250 during no school weeks.  My wife also insisted on the pre-K programming.  I didnít buy it - itís not as if my kid would have been an antisocial sociopath because she didnít go to a pre-K program.  I lost that argument.  Avenge me by winning it now that itís your turn.

3.  Dude, $400 for a kids party for a one year old isnít a kids party. Itís an adult party and itís crazy unless you are celebrating something awesome. .  You're the guy who buys everyone a round at the bar.  Cool guy to know, expensive guy to be. 

4. You got Hulu, Spotify, Netflix, prime, etc. Death of a thousand cuts.  Thatís a lot of entertainment.   You got rid of cable and I bet you donít miss it (we are the same - got rid of it way before found MMM).  You wonít miss half this other shit either.  Watching tv is lame. Cut it.

5.  Pest control?  What the hell kind of woods do you live by that there are legions of pests invading your home?   Iíd say unless you are actively fighting some sort of infestation thatís probably a waste of money.  Kinda like an alarm company - false sense of security.  Go buy some rat traps or whatever and DIY.

6. Youíve listed restaurants, special occasions, coffee shops, and guests/entertaining as separate categories. That might make them easier to justify but when you add them up itís almost $500 a month.

7. The big house projects is the big one.  I fight the same battles. We sure do have a sweet patio, and great landscaping, etc etc. But looking back Iíd rather the cash.

8.  We are fighting high grocery bills too.  For the last month weíve been making a weekly menu and shopping off a list.  No coupons or anything (yet) and already itís reduced by about 15%. I recommend this. Itís worked so far for us but still have a long way to go.

Just a few things that jump out at me.   Before anyone calls me out on my hypocrisy, I must say youíve motivated me to dig in and hit phase 2 of our plans.

At least I know there is more than one of me!  Thanks for the companionship in this situation.  Good to know I'm not the only one!

1. Electric - I will turn the heat dry off on my DW today.  Good suggestion.  I'll see if I can make some progress with my wife on the clothesline but since she generally does the laundry, she kind of calls the shots there.  Maybe I can take over the laundry duties and show her a clothesline isn't all that bad.  But I think the main load here is coming from the heat pumps.  New England winters are brutal. 

2. Our Au Pair's stipend is $200 a week.  BUT the agency charges about $9,000 a year.  So I'm factoring in the agency cost into that number too. We also gave her $500 as a bonus because she is so good with the kids.  That's also factored in.  I couldn't agree more about the Pre-k thing.  I lost, and that's about $6,800 for the year.

3. You're totally right about the kids party.  It really was more of an adult party veiled as a kids party.  But I definitely could have spent less on that.  Point taken.

4. You're right about having Netflix, Hulu, Prime, and Spotify.  We do use them all but I'm sure we could cut one, at least.  It seems like overkill.

5. Definitely a good point about the pest control too.  I'm surprised you're the only one to call me out for this one.  Probably because it's a pretty low number comparatively.  BUT, I keep telling my wife we should cancel it and just see how it goes.  If we get a massive influx of pests and infestation, we can always have them come back.

6. Also a good point about the all the entertainment stuff.  You're right that adding them all up to $500 a month is ridiculous!  Maybe I can point my wife to this number instead of the individual line items and it will be a good face punch for her. I'm sure we could find someplace to cut back here.

7. Yeah this one is the real killer.  I've been talking to her about this a lot and perhaps making some headway.  The other thing to keep in mind here is that this one obviously won't last forever.  Like after we do the patio, kitchen, and bathroom, I think she'll be satisfied for a long time.  But still those three projects are probably close to $50K, which would be fifty months at $1,000 a month.

8. Agree here too.  Just to recap what I said to an above poster "I totally agree here about the food budget.  I literally have no idea how we spend this much but we usually shop once a week and it's around $275 or so.  I have two kids who love those fruit/vegetable "pouches" and can eat several of them a day.  And because it's fruits and vegetables we usually let them because they generally are picky and won't eat whole fruits or vegetables.  Those packets cost $1.09 or $1.19 each and I'll usually buy around 40 a week so that's almost $50 a week right there. My wife doesn't really look at prices.  She buys organic a lot and buys lots of berries which are expensive per calorie.  We should definitely start doing Costco or something along with generally being better about watching prices."

Anyway, all very good points!  Thank you!  Much appreciated.  Maybe we can motivate each other somehow and compare budgets a year from now to see how we are doing... :)




Jadambomb

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Re the au pair driving - you already pay her for her wages (a lot compared to the going rate here) and food and acccomodations, so why is unlimited car rights included?  We charge ours 20 cents per km and that is pretty standard practice for people with au pairs around here.

Interesting about that being standard practice.  I'm going to try to do something like that too.  I'm sure that would help the gas budget a lot.

CareCPA

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...
8. Agree here too.  Just to recap what I said to an above poster "I totally agree here about the food budget.  I literally have no idea how we spend this much but we usually shop once a week and it's around $275 or so.  I have two kids who love those fruit/vegetable "pouches" and can eat several of them a day.  And because it's fruits and vegetables we usually let them because they generally are picky and won't eat whole fruits or vegetables.  Those packets cost $1.09 or $1.19 each and I'll usually buy around 40 a week so that's almost $50 a week right there. My wife doesn't really look at prices.  She buys organic a lot and buys lots of berries which are expensive per calorie.  We should definitely start doing Costco or something along with generally being better about watching prices."
...
Are you talking about the food puree they eat out of a pouch?
They make reusable ones. Here's one example I found from a quick search: https://www.amazon.com/Squooshi-Reusable-Pouch-Large-Pouches/dp/B00HPD4V1Y. There are probably cheaper ones if you look.
These and a blender would be way cheaper. You can probably cut $40 a week just here.

Jadambomb

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...
8. Agree here too.  Just to recap what I said to an above poster "I totally agree here about the food budget.  I literally have no idea how we spend this much but we usually shop once a week and it's around $275 or so.  I have two kids who love those fruit/vegetable "pouches" and can eat several of them a day.  And because it's fruits and vegetables we usually let them because they generally are picky and won't eat whole fruits or vegetables.  Those packets cost $1.09 or $1.19 each and I'll usually buy around 40 a week so that's almost $50 a week right there. My wife doesn't really look at prices.  She buys organic a lot and buys lots of berries which are expensive per calorie.  We should definitely start doing Costco or something along with generally being better about watching prices."
...
Are you talking about the food puree they eat out of a pouch?
They make reusable ones. Here's one example I found from a quick search: https://www.amazon.com/Squooshi-Reusable-Pouch-Large-Pouches/dp/B00HPD4V1Y. There are probably cheaper ones if you look.
These and a blender would be way cheaper. You can probably cut $40 a week just here.

That's exactly what I'm talking about!  Good find.  Let me look into these but it looks promising.  Thank you!

neo von retorch

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This was mentioned before, but I'll reiterate.

Your stash at retirement is 25x expenses (excluding the P&I of your mortgage)...
... then add your remaining mortgage.

So if the $4500/month in retirement figure quoted earlier was correct, then lets say you retire with $300k left on the morgage? You need 300 x 4500 + 300k = $1.65M.

If we use your $8k/month, but reduce that by $2k to account for the P&I payment, then you're at $2.1M...

Bracken_Joy

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This was mentioned before, but I'll reiterate.

Your stash at retirement is 25x expenses (excluding the P&I of your mortgage)...
... then add your remaining mortgage.

So if the $4500/month in retirement figure quoted earlier was correct, then lets say you retire with $300k left on the morgage? You need 300 x 4500 + 300k = $1.65M.

If we use your $8k/month, but reduce that by $2k to account for the P&I payment, then you're at $2.1M...

He also pointed out, that $8k does NOT include tax burden, so that's worth noting.

OP, have you played with the Case Study spreadsheet? There are some very useful tools in there. https://forum.mrmoneymustache.com/case-studies/how-to-write-a-'case-study'-topic/ Spreadsheet is linked in that first post.

So OP, what's your math like? How much do you have to be saving every month, and therefore spending every month, to hit your goal in 7 years?

Nick_Miller

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@Jadambomb, maybe I missed it, but how do you have so much equity in your house? Huge down payment? Huge appreciation? Something else?

I just figured that you would be able to pay off the mortgage before you FIRE, but I'm not sure how you've been able to make so much traction on the house in such a relatively short time.

Without childcare and without a mortgage, and if you could ever stop the $12,000 "make a nicer house" fund, crap your annual expenses wouldn't be high at all! I'd guess health care would be the main concern/cost, and then figuring out if you're going to put away for kids' college.

But I don't think FIRE for you = needing $3M, or even $2M.

Jadambomb

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This was mentioned before, but I'll reiterate.

Your stash at retirement is 25x expenses (excluding the P&I of your mortgage)...
... then add your remaining mortgage.

So if the $4500/month in retirement figure quoted earlier was correct, then lets say you retire with $300k left on the morgage? You need 300 x 4500 + 300k = $1.65M.

If we use your $8k/month, but reduce that by $2k to account for the P&I payment, then you're at $2.1M...

He also pointed out, that $8k does NOT include tax burden, so that's worth noting.

OP, have you played with the Case Study spreadsheet? There are some very useful tools in there. https://forum.mrmoneymustache.com/case-studies/how-to-write-a-'case-study'-topic/ Spreadsheet is linked in that first post.

So OP, what's your math like? How much do you have to be saving every month, and therefore spending every month, to hit your goal in 7 years?

It looks like we'd have to save about $4,000 more a month or so to get there.  Or spending of roughly $7,000 per month.  Now actually we won't be THAT far off in three years when our youngest goes to kindergarten.  But we'd have to start that today to get there. 

Bracken_Joy

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This was mentioned before, but I'll reiterate.

Your stash at retirement is 25x expenses (excluding the P&I of your mortgage)...
... then add your remaining mortgage.

So if the $4500/month in retirement figure quoted earlier was correct, then lets say you retire with $300k left on the morgage? You need 300 x 4500 + 300k = $1.65M.

If we use your $8k/month, but reduce that by $2k to account for the P&I payment, then you're at $2.1M...

He also pointed out, that $8k does NOT include tax burden, so that's worth noting.

OP, have you played with the Case Study spreadsheet? There are some very useful tools in there. https://forum.mrmoneymustache.com/case-studies/how-to-write-a-'case-study'-topic/ Spreadsheet is linked in that first post.

So OP, what's your math like? How much do you have to be saving every month, and therefore spending every month, to hit your goal in 7 years?

It looks like we'd have to save about $4,000 more a month or so to get there.  Or spending of roughly $7,000 per month.  Now actually we won't be THAT far off in three years when our youngest goes to kindergarten.  But we'd have to start that today to get there.

Be sure not to forget expected market gains =) (Related: what's you asset allocation like? That'll influence what to expect for returns). Once you have that spending number, then you have a pretty solid number to know how much to cut! That helps you get into the specific goal/specific numbers mindset, rather than just, "this seems high". You have a big shovel and good assets, if you play it right, 7 years *should* be completely doable.

Frankly though? From what you're saying, I'm not sure the au pair actually is your cheapest option over other care. Feeding her, housing her, wear and tear on your cars, gas, then the more obvious numbers... that'll add up! You've added another adult to your household you're completely bankrolling.

Hirondelle

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Wow. $11000/month is a lot! FIRE in 7 years would require you to increase your savings rate by quite a bit. Not counting your house equity you have a little under 1M of stash. To get to FIRE in 7 years on your current income you'd need to get to a 50% savings rate which would mean your expenses have to reduce to approximately $7250 - which you then have to maintain during FIRE. Here's some suggestions to reduce spending:

All budgets are MONTHLY

Auto Related - Roughly $740
1. Car Insurance (Two cars, both paid off. Three drivers. 1. 2008 Lexus RX 350  2. 2012 Kia Optima Hybrid) - $148
2. Car Replacement Allowance Fund - $200
3. Car Wash/Tolls/Parking - $20
4. Excise Tax and Registration - $18
5. Gas - $200
6. Maintenance and Repairs (This might include one large repair bill of $1000 per year or so.  Something always happens) - $150
Now I know nothing about cars, but do you really need 2 of them? You say your wife works from home 90% of the time. You only work 9 miles away. I've lived in MA before, so I know there's a fairly decent public transportation system - is there an option to get to work by public transit? Ebike would also be a good option. Also, let the aupair drive less. That's really too much gas that she's not paying for.

Bills/Utilities - Roughly $480
1. Electric - $210 (includes heating (heat pumps) and a/c)
2. Firewood - $50 (roughly two cords of wood)
3. Heating Oil (for hot water and backup for heat pumps) - $140
4. Mobile Phone - $99 (Unlimited data because my work doesn't have WiFi)
5. Sewer - $35
6. TV/Internet Service (no cable. Internet service for $40 and $8 for Hulu) - $48
Try to cut down on the data, you can probably get a way cheaper package that still has a lot of data. See how much you're using in a month and check out prices on that amount. Also limit your data activities to low MB-activities. So no videos etc, but texting or reading websites is fine as it doesn't use much data.

Entertainment - Roughly $175
1. Guests/Entertaining (This includes backyard bbqs, birthday parties for the kids, dinners if guests come over.  Keep in mind that one party for kids might cost $400 or so with food and booze) - $75
2. Netflix - $11
3. Music/Spotify - $10
4. Special Occasions (Dinner for my wife's birthday, Valentines Day, my birthday, Anniversaries.  One dinner might be $200) - $75
You're pretty good at splitting out expenses so individual categories don't seem that high! Both 1 and 4 are expenses covering birthdays and parties. Also these dinners are apparently NOT included in your food/dining category. BTW; You don't need annual $200 dinners. Keep those for the milestone birthdays and anniversaries. Get a cheaper dinner out or a super-fancy home cooked dinner for the others. Also, there's been enough said about the kid bday party. No more of that. Also, Spotify with commercials really isn't that bad. Youtube with an adblocker is a good alternative too.

Food & Dining - Roughly $1,550
1. Coffee Shops (We make coffee at home everyday.  We might buy a coffee once a week.) - $25
2. Groceries (Three adults including the Au Pair, Two boys under five) - $1,150
3. Liquor - $60 (I'm trying to cut back)
4. Restaurants (We order out once a week for three people, and might go out to a restaurant once a month) - $275
5. Work Lunch (I almost always bring lunch to work) - $20
Once a week coffee, once a week takeout, twice a month worklunch and once a month dining adds up! Cut in half, should be easy. Groceries are INSANE. Check out the Less $200/month grocery spend for family of 4 thread for inspiration.

Gifting - $50
1. Gifts (kids birthdays, each others birthdays, friend's kid's birthdays) - $50
Really? Another line item for your bdays? Didn't you already spend 150/month on the dinners and parties related to those??

Home - Roughly $4,400
1. Furniture/Appliances allowance/replacement budget (This would mean $480 per year) - $40
2. Home Improvement allowance budget (My wife wants to continually upgrade our house.  This would mean one $12,000 project per year) - $1,000
3. Home Maintenance Allowance Budget (Oil Boiler Maintenance, A/C Servicing, Roof replacement every 20 years, House Painting every 10 years or so) - $325
4. Home Supplies (TP, Papertowels, batteries, cleaning supplies) - $150
5. Lawn & Garden (One fall cleanup, a few bags of organic fertilizer.  I do everything else myself) - $50
6. Mortgage (R/E Taxes and Insurance = $850, Mortgage payment = $2,000) = $2,850
7. Pest control Service (We live near a lot of woods) - $29
8. Snow Plowing (Huge Driveway) - $40
Try to slow down the home improvement. You expect your wife to be happy after a new kitchen, bathroom and patio, but after that she'll be tired of the living room, the bedroom or whatever other rooms you have in your house. I like the suggestion of doing this after the kids are in (free!) public school. Half the fund and do biannual rather than annual improvements. Home supplies are also insane. How on earth are you using that much toilet paper and paper towels??

Kids - Roughly $2,550 (This should drop down drastically after our youngest kid goes to Kindergarten and we no longer need an Au Pair or Pre-K)
1. Au Pair and Pre-K (roughly $1800 for AU Pair and $575 for Pre-K) - $2,375
2. Kids Activities (Soccer, Dancing, Taking them to Children's Museums, the Zoo etc) $75
3. Kids Supplies - (Diapers/Wipes/Clothing/Toys) - $100
Your kids are <5, why do they need so many activities? I mean.. they're apparently still in diapers so must be really young? In my hometown kids weren't even allowed to start "real" sports before the age of 6. You can play soccer in the parc and dance with your kids in the living room. If you don't have time, ask the au pair to play active games with them. Kids can play outside without it being an official activity, it's good for them.

Personal Care - $110
1. Beauty/Grooming (Birchbox, Razor Heads, Shampoo, Soap, Lotions etc.) - $25
2. Dry Cleaning - $15
3. Hair Cuts (For my wife, me, two kids) - $50
4. Mani/Pedi (One every two or three months) - $20
Try out cutting your own hair. Mani/Pedi is unnecessary but for $20/month don't fight over it if your wife insists. Shampoo and soap don't have to cost $25/month.

Shopping - $115
1. Clothing (For me and my wife) - $115
That's a lot considering it doesn't include the cost of your kids' clothes. Shop less, declutter and try thrift shopping.

Travel - $425
1. Travel/Vacation (Flights, hotels, gas, food, etc.  This would be $5,100 per year) - $425
Where are you flying 2x yearly? Any way you can cut this down to 1 flight and 1 roadtrip? Check out travel hacking to reduce flying and hotel costs.

« Last Edit: June 21, 2018, 09:28:39 AM by Hirondelle »

robartsd

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We'd love to FIRE by around age 45 or so.  That's really our only goal.  We are 38 now.  Assets vs liabilities I think we are doing decently well. 

Assets:
1. Our house which probably worth about $900,000
2. Investments - $967,000

Liabilites:
Mortgage - $371,000  and that's it. 

You could easily FIRE on your current assets if you're willing to relocate to a lower cost of living. $900k - $371k mortgage - $45k selling costs = $484k. Buy a house for about $250k and add the rest to your investments providing about $4k monthly budget using the 4% rule. You have to decide what's important enough to keep working for - if it's not cut it.

Jadambomb

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This was mentioned before, but I'll reiterate.

Your stash at retirement is 25x expenses (excluding the P&I of your mortgage)...
... then add your remaining mortgage.

So if the $4500/month in retirement figure quoted earlier was correct, then lets say you retire with $300k left on the morgage? You need 300 x 4500 + 300k = $1.65M.

If we use your $8k/month, but reduce that by $2k to account for the P&I payment, then you're at $2.1M...

He also pointed out, that $8k does NOT include tax burden, so that's worth noting.

OP, have you played with the Case Study spreadsheet? There are some very useful tools in there. https://forum.mrmoneymustache.com/case-studies/how-to-write-a-'case-study'-topic/ Spreadsheet is linked in that first post.

So OP, what's your math like? How much do you have to be saving every month, and therefore spending every month, to hit your goal in 7 years?

It looks like we'd have to save about $4,000 more a month or so to get there.  Or spending of roughly $7,000 per month.  Now actually we won't be THAT far off in three years when our youngest goes to kindergarten.  But we'd have to start that today to get there.

Be sure not to forget expected market gains =) (Related: what's you asset allocation like? That'll influence what to expect for returns). Once you have that spending number, then you have a pretty solid number to know how much to cut! That helps you get into the specific goal/specific numbers mindset, rather than just, "this seems high". You have a big shovel and good assets, if you play it right, 7 years *should* be completely doable.

Frankly though? From what you're saying, I'm not sure the au pair actually is your cheapest option over other care. Feeding her, housing her, wear and tear on your cars, gas, then the more obvious numbers... that'll add up! You've added another adult to your household you're completely bankrolling.

We are about 80% equities, 15% bonds, 5% Gold for asset allocation. 

I'm sure the Au Pair is more than we think but the absolute cheapest childcare option in my area is $7 an hour per kid.  And that's a place I'd REALLY rather not send them too.  That's about $2,750 per month instead of the $1,800 per month including the agency fee.  I doubt we are spending more than $950 a month on her food, gas, car depreciation and insurance, and increased utility costs, BUT it's probably closer than I might think.  But if you compare it to an actual decent child care place, that's probably closer to $3,200 minimum which makes the Au Pair seem even more economical.

ysette9

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We have very similar overall spending as your household and also have two small kids. Our kiddos are in a home daycare and we spend about $3k a month on that. Our overall housing cost with property taxes and insurance is around $5k, so like you, between those two that is a lot of spending, though temporary in nature. We also have a death by a thousand paper cuts and need to do better. However, we bring in about double what you do, so our savings rate is still healthy though we are ridiculously spendy. My hope and belief is that we will spend less once we have more time and aren’t trading $ for convenience. With two littles and two careers it can be tough to balance.

Good luck with your situation. It is a process of little improvements over time that build on themselves. Cut one thing and go a month or two to see if you really miss it or not. We never had cable but we cut Pandora and Netflix that way and are totally fine now. The library is a great resource for mind-numbing screen entertainment if we even find the time, which we usually don’t. Costco is probably next on our chopping block as well as amazon prime. You just need to do the evaluation to make sure you are getting enough value out of these services to warrant the cost.

MrsDinero

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...
8. Agree here too.  Just to recap what I said to an above poster "I totally agree here about the food budget.  I literally have no idea how we spend this much but we usually shop once a week and it's around $275 or so.  I have two kids who love those fruit/vegetable "pouches" and can eat several of them a day.  And because it's fruits and vegetables we usually let them because they generally are picky and won't eat whole fruits or vegetables.  Those packets cost $1.09 or $1.19 each and I'll usually buy around 40 a week so that's almost $50 a week right there. My wife doesn't really look at prices.  She buys organic a lot and buys lots of berries which are expensive per calorie.  We should definitely start doing Costco or something along with generally being better about watching prices."
...
Are you talking about the food puree they eat out of a pouch?
They make reusable ones. Here's one example I found from a quick search: https://www.amazon.com/Squooshi-Reusable-Pouch-Large-Pouches/dp/B00HPD4V1Y. There are probably cheaper ones if you look.
These and a blender would be way cheaper. You can probably cut $40 a week just here.

That's exactly what I'm talking about!  Good find.  Let me look into these but it looks promising.  Thank you!


We used to give our kids those fruit/veg pouches for the exact same reason you stated, because they wouldn't eat the whole fruit/veg.  I was even buying them by the case from Amazon (much cheaper than the store), then it dawned on me how we got into this circle.   

The kids wouldn't eat whole fruit/veg because WE stopped giving it to them.  The pouches were easier, less messy, and less argumentative.  Once we realized we created the problem, we decided to just go cold turkey with them and stopped buying them.  It took a couple of weeks and several tantrums but the kids started eating the fruits/veg whole.  8 months later we have zero problems.   We will still keep 2 in the diaper bag, but the kids know they are now only occasional snacks.  In fact the kids haven't had one, even as a snack, in several weeks.

Jadambomb

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@Jadambomb, maybe I missed it, but how do you have so much equity in your house? Huge down payment? Huge appreciation? Something else?

I just figured that you would be able to pay off the mortgage before you FIRE, but I'm not sure how you've been able to make so much traction on the house in such a relatively short time.

Without childcare and without a mortgage, and if you could ever stop the $12,000 "make a nicer house" fund, crap your annual expenses wouldn't be high at all! I'd guess health care would be the main concern/cost, and then figuring out if you're going to put away for kids' college.

But I don't think FIRE for you = needing $3M, or even $2M.

We had a pretty big downpayment but nothing huge.  We put down 27.5% or $159,000 and we bought our house for $576,000 in 2012.  Our area has definitely had a lot of price appreciation since then as well.  And we've also put about $60,000 in for home improvements (See?  $12,000 a year x five years...  :))  Then we also made two additional payments to the principal of $2,750 each, or $5,500 total. 

You're right though.  Once the kids are in school and our childcare expenses drop significantly it will look and feel a lot different.  The childcare stuff won't go away completely for a while because we will still need after school care.  But it will be more like $5,000 for both kids instead of $30,000. That day just seems so far away, but it really is about three years or so.   

Also I don't think we will have our mortgage paid off near FIRE, especially if we actually FIRE around 45 or 50.  As of now, it's looking like it will be paid off in around 2040, but we hope to make some headway on that.  But I still think we will have it for a good while after FIRE. 

neo von retorch

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Also I don't think we will have our mortgage paid off near FIRE, especially if we actually FIRE around 45 or 50.  As of now, it's looking like it will be paid off in around 2040, but we hope to make some headway on that.  But I still think we will have it for a good while after FIRE.

Still, think about this for a second. If you need $2000 per month forever because of a mortgage, you need $600k invested. But if your mortgage when you retire is $300k... umm... why do you need $600k invested when you could just pay off your $300k mortgage instantly?

Bracken_Joy

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This was mentioned before, but I'll reiterate.

Your stash at retirement is 25x expenses (excluding the P&I of your mortgage)...
... then add your remaining mortgage.

So if the $4500/month in retirement figure quoted earlier was correct, then lets say you retire with $300k left on the morgage? You need 300 x 4500 + 300k = $1.65M.

If we use your $8k/month, but reduce that by $2k to account for the P&I payment, then you're at $2.1M...

He also pointed out, that $8k does NOT include tax burden, so that's worth noting.

OP, have you played with the Case Study spreadsheet? There are some very useful tools in there. https://forum.mrmoneymustache.com/case-studies/how-to-write-a-'case-study'-topic/ Spreadsheet is linked in that first post.

So OP, what's your math like? How much do you have to be saving every month, and therefore spending every month, to hit your goal in 7 years?

It looks like we'd have to save about $4,000 more a month or so to get there.  Or spending of roughly $7,000 per month.  Now actually we won't be THAT far off in three years when our youngest goes to kindergarten.  But we'd have to start that today to get there.

Be sure not to forget expected market gains =) (Related: what's you asset allocation like? That'll influence what to expect for returns). Once you have that spending number, then you have a pretty solid number to know how much to cut! That helps you get into the specific goal/specific numbers mindset, rather than just, "this seems high". You have a big shovel and good assets, if you play it right, 7 years *should* be completely doable.

Frankly though? From what you're saying, I'm not sure the au pair actually is your cheapest option over other care. Feeding her, housing her, wear and tear on your cars, gas, then the more obvious numbers... that'll add up! You've added another adult to your household you're completely bankrolling.

We are about 80% equities, 15% bonds, 5% Gold for asset allocation. 

I'm sure the Au Pair is more than we think but the absolute cheapest childcare option in my area is $7 an hour per kid.  And that's a place I'd REALLY rather not send them too.  That's about $2,750 per month instead of the $1,800 per month including the agency fee.  I doubt we are spending more than $950 a month on her food, gas, car depreciation and insurance, and increased utility costs, BUT it's probably closer than I might think.  But if you compare it to an actual decent child care place, that's probably closer to $3,200 minimum which makes the Au Pair seem even more economical.

Fair, you definitely would know childcare prices/options in your area better than I do! It's just one of those things that's it's good to know the real cost of something. Particularly where you should modify. Like her driving, it isn't just gas, it's wear on your vehicles. You say a big repair comes up every year, right? (For one, going for a less luxury brand than lexus would help cut cost of repairs, but that's something to keep in mind at replacement time). She's putting a lot of miles and wear and tear on the cars for personal use. Compare her mileage to the IRS rate. 54.5 cents per mile for business use. At 60 miles each way every week, that's an extra $65.40/week. $261.60 per month. Obviously having her drive for kids activities and such is expected, and don't nickel and dime her to death, but 60 miles away to see friends on a regular basis is bonkers IMO.

The other thing I would caution is assuming once your wife gets the renovations she has in mind right now, that the costs for those will stop. That has never been the case in any family that does the "reno game". First it's the renos. Then it's the landscaping. Then the furniture is out of date. Then they want a swimming pool or an addition. Then the kitchen wasn't done all that great in the first place, and we need to replace the counters, but while we're at it shouldn't we just do the whole thing anyway? On and on. Spending becomes a HABIT. There's a reason the hedonic treadmill is something that keeps moving. https://www.mrmoneymustache.com/2011/10/22/what-is-hedonic-adaptation-and-how-can-it-turn-you-into-a-sukka/ and https://www.mrmoneymustache.com/2012/09/18/is-it-convenient-would-i-enjoy-it-wrong-question/

rdaneel0

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Ask and ye shall receive.

Holy shit! I canít imagine how much money you make to even be able to spend so much, so I can definitely help :)

Firewood- $50óówhy are you spending any money on firewood in MA? and you say you live near woods, so much woods that you need pest control, but then you buy wood! and $600 a year at that! come on! there must be a way to get this for free, get creative and feel accomplished. bonus: your wife will swoon if you chop wood, i promise. Iíd change this to $0.


Entertainment: I can almost guarantee you your numbers arenít right on this. You say $175 total, but I find it hard to believe that youíre able to entertain on that budget when you spend over a thousand on standard groceries for your family. Iíd re-check this number. I bet youíre spending way more on special occasions as well.


Coffee Shops- $25 óóthereís no reason, with awesome travel mugs and super fancy home coffee machines, to ever spend on coffee out- I donít see a difference between a quick coffee out and buying bottled water. Change to $0

Groceries - $1,150 óó this is insane. even at a very doable $100 a month per person this would only be $500, I think $400 is more realistic since the kids are so little. You need to meal plan and cook and stop buying pre-made crap. I bet your waste is out of control in this department too, you must be throwing away a ton of food.

Restaurants - $275 óó Iím surprised itís this low with ordering out once a week and going out to a restaurant, I guess this doesnít include your special occasion restaurants? Still, how can you justify any restaurants when youíre already spending over a grand a month on groceries? Bump this down to $75.

Work Lunch- $20 óó Bring lunch always, not almost always. This should be $0.

NOTE: Do you realize that through all your different food categories (special occasion, lunch, coffee, groceries, restaurants, entertaining) your family is spending $1,620 a month on just consumables? And this WILL go up once those kids are older.

Home Improvement allowance- $1,000 óó you must know this is pretty extravagant. why so much? why does the house have to be constantly upgraded? iíd understand if it was a one off project but this is just lighting money on fire. would your wife be open to learning about hedonic adaptation? wouldnít she love to feel totally happy with her home? it must be awful to always feel like things need to be better. this is an internal job, IMO, but this should absolutely be $0.

I donít understand why you have home supplies and furniture/appliances separate, you are spending an absurd amount of money on unnecessary home crap. Iím almost afraid to ask how big your home isÖ

Furniture/Appliance/Home

Home Supplies ó $150 - Costco or BJs is your friend here, you can easily knock this down to $50 or so.

Home Maintenance ó $325 (this should include furniture and appliance allowance, so that category goes away, thereís a difference between replacing because something is unfixable and replacing because something else is new) Iíd knock this to $150 and build up a home savings account.


Your mortgage is really high, but Iím not sure how much youíre willing to change/want to save. Itís hard to say without a goal stated. I wouldnít pay that much for a mortgage though, and I live in NY. Especially since youíre dumping so much other money into the house, itís a total money sink for you.

Personal care- Iím surprised youíre as low as you are on this, Iíve never seen a mani pedi for that cheap (plus thereís tip) and I wonder if this is really reflective of your personal care items? 4 haircuts for $50? is that with a tip? Birchbox is a terrible deal too, they basically package free samples and then make people pay a subscription fee. If you just reach out to cosmetics companies they will send you free samples for literally anything. Even Sephora will give you free samples if you ask. Mani Pedi can be in-sourced too and I would stop buying anything that needs dry cleaning. Iíd bump down your personal care to $65.

Clothing ó $115 - you say this is just for you and your wife, so what about the kids? I donít see why they canít be included in this. you presumably donít need new stuff every single month, right? Eliminate kidís clothing spending and bump down Kid Supplies to $75 while youíre at it.

Travel- $425 ó I assume you arenít travel hacking at all? This could easily be bumped down to $300

Miscellaneous- Nahhhhh, no miscellaneous. $0.

Just this shaves a little over $2,600 off your monthly costs, but the house is the other culprit. The house costs are absurd (mortgage plus associated costs to keep it going). That said, you seem to make a massive income and still have a relatively high net worth. I just shudder to think at when youíll ever be able to retire.

The issue isnít that you canít afford what youíre doing right now, because you can due to a high income, but if you need this much to live on FOREVER youíre going to need one hell of a nest egg. I suspect your costs will increase over time, not decrease, and that your savings will gradually narrow as your kids become pricier and voice their own demands. In your case it goes beyond money. Some people come here massively in debt or low income or whatever, but your issue is just sheer consumption. You asked for feedback, and my feedback is that your super high income is masking your insane levels of consuming and consuming. To be totally honest (and throw a face punch) I canít imagine how much of your physical time is spent just shopping and buying and hiring people to do stuff for you. Do you have any free hobbies or rewarding past times that are based on creating and making rather than buying?

If youíre ok with all this and you feel your spending reflects your values and that you have a true sense of happiness and satisfaction in your life, I guess thereís no reason to change. I predict you will not retire as early as you think despite what retirement calculators say, because I think youíre so tied up in the hedonic adaptation trap that your costs will climb and climb, but youíre big enough earners that you wonít end up in real trouble like most people (who are drowning in debt, being foreclosed on , etc.).

I think you and your wife should talk about what you want your lives to look like, whatís fulfilling longterm versus easy short term, and when enough is enough. That kind of thing, of course you both have to be on the same page. Best of luck!

Hirondelle

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One more thing I just thought of...  I don't see any charity? So you're earning $14.5k/month and spending $11k of it and Not. A. Single. Dollar. is spent to help others. You're spending all these crazy amounts of money on kids activities, fancy anniversary parties, regular groceries and house improvement, but you're not spending a single dollar on improving the lives of people who are less fortunate?

I'd suggest you redirect some of the savings on your fancy kids activities to provide food/shelter for kids who need it harder than your own.


ETA: Sorry if this comment comes off as rough/judgemental, but I was genuinely shocked when I realized.

KBecks

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The thing that jumps out at me is $12,000/year for home improvements and remodeling.  Can you slow down your home improvements?  Is your home safe and functional?  You are just throwing money at this and you should both meditate on the money vs. the value for money you are getting.  I bet your house is already nice.


gaja

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I don't know how pre-K works; how many hours a day/week are the kids there?

Jadambomb

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Ask and ye shall receive.

Holy shit! I canít imagine how much money you make to even be able to spend so much, so I can definitely help :)

Firewood- $50óówhy are you spending any money on firewood in MA? and you say you live near woods, so much woods that you need pest control, but then you buy wood! and $600 a year at that! come on! there must be a way to get this for free, get creative and feel accomplished. bonus: your wife will swoon if you chop wood, i promise. Iíd change this to $0.


Entertainment: I can almost guarantee you your numbers arenít right on this. You say $175 total, but I find it hard to believe that youíre able to entertain on that budget when you spend over a thousand on standard groceries for your family. Iíd re-check this number. I bet youíre spending way more on special occasions as well.


Coffee Shops- $25 óóthereís no reason, with awesome travel mugs and super fancy home coffee machines, to ever spend on coffee out- I donít see a difference between a quick coffee out and buying bottled water. Change to $0

Groceries - $1,150 óó this is insane. even at a very doable $100 a month per person this would only be $500, I think $400 is more realistic since the kids are so little. You need to meal plan and cook and stop buying pre-made crap. I bet your waste is out of control in this department too, you must be throwing away a ton of food.

Restaurants - $275 óó Iím surprised itís this low with ordering out once a week and going out to a restaurant, I guess this doesnít include your special occasion restaurants? Still, how can you justify any restaurants when youíre already spending over a grand a month on groceries? Bump this down to $75.

Work Lunch- $20 óó Bring lunch always, not almost always. This should be $0.

NOTE: Do you realize that through all your different food categories (special occasion, lunch, coffee, groceries, restaurants, entertaining) your family is spending $1,620 a month on just consumables? And this WILL go up once those kids are older.

Home Improvement allowance- $1,000 óó you must know this is pretty extravagant. why so much? why does the house have to be constantly upgraded? iíd understand if it was a one off project but this is just lighting money on fire. would your wife be open to learning about hedonic adaptation? wouldnít she love to feel totally happy with her home? it must be awful to always feel like things need to be better. this is an internal job, IMO, but this should absolutely be $0.

I donít understand why you have home supplies and furniture/appliances separate, you are spending an absurd amount of money on unnecessary home crap. Iím almost afraid to ask how big your home isÖ

Furniture/Appliance/Home

Home Supplies ó $150 - Costco or BJs is your friend here, you can easily knock this down to $50 or so.

Home Maintenance ó $325 (this should include furniture and appliance allowance, so that category goes away, thereís a difference between replacing because something is unfixable and replacing because something else is new) Iíd knock this to $150 and build up a home savings account.


Your mortgage is really high, but Iím not sure how much youíre willing to change/want to save. Itís hard to say without a goal stated. I wouldnít pay that much for a mortgage though, and I live in NY. Especially since youíre dumping so much other money into the house, itís a total money sink for you.

Personal care- Iím surprised youíre as low as you are on this, Iíve never seen a mani pedi for that cheap (plus thereís tip) and I wonder if this is really reflective of your personal care items? 4 haircuts for $50? is that with a tip? Birchbox is a terrible deal too, they basically package free samples and then make people pay a subscription fee. If you just reach out to cosmetics companies they will send you free samples for literally anything. Even Sephora will give you free samples if you ask. Mani Pedi can be in-sourced too and I would stop buying anything that needs dry cleaning. Iíd bump down your personal care to $65.

Clothing ó $115 - you say this is just for you and your wife, so what about the kids? I donít see why they canít be included in this. you presumably donít need new stuff every single month, right? Eliminate kidís clothing spending and bump down Kid Supplies to $75 while youíre at it.

Travel- $425 ó I assume you arenít travel hacking at all? This could easily be bumped down to $300

Miscellaneous- Nahhhhh, no miscellaneous. $0.

Just this shaves a little over $2,600 off your monthly costs, but the house is the other culprit. The house costs are absurd (mortgage plus associated costs to keep it going). That said, you seem to make a massive income and still have a relatively high net worth. I just shudder to think at when youíll ever be able to retire.

The issue isnít that you canít afford what youíre doing right now, because you can due to a high income, but if you need this much to live on FOREVER youíre going to need one hell of a nest egg. I suspect your costs will increase over time, not decrease, and that your savings will gradually narrow as your kids become pricier and voice their own demands. In your case it goes beyond money. Some people come here massively in debt or low income or whatever, but your issue is just sheer consumption. You asked for feedback, and my feedback is that your super high income is masking your insane levels of consuming and consuming. To be totally honest (and throw a face punch) I canít imagine how much of your physical time is spent just shopping and buying and hiring people to do stuff for you. Do you have any free hobbies or rewarding past times that are based on creating and making rather than buying?

If youíre ok with all this and you feel your spending reflects your values and that you have a true sense of happiness and satisfaction in your life, I guess thereís no reason to change. I predict you will not retire as early as you think despite what retirement calculators say, because I think youíre so tied up in the hedonic adaptation trap that your costs will climb and climb, but youíre big enough earners that you wonít end up in real trouble like most people (who are drowning in debt, being foreclosed on , etc.).

I think you and your wife should talk about what you want your lives to look like, whatís fulfilling longterm versus easy short term, and when enough is enough. That kind of thing, of course you both have to be on the same page. Best of luck!

I definitely like some of the suggestions you made.  I'm going to try to implement a lot of them.

Mani/Pedi - She gets one of those every three months or so.  That's why the monthly budget is so low. 

Totally agree about the Birchbox. 

Hair - I get my haircut every six weeks, my wife every other month, my two kids, also every two months or so. 

Entertainment - Actually that's correct.  We probably have two backyard bbqs a year.  And have a few dinners at our place a year. 

I definitely agree about travel and groceries.  No doubt we can save on those two.

It is interesting because I know it seems like we live a massively luxurious lifestyle, and there's no question we have areas to improve like groceries, Home Improvement budget for sure, but we really don't live a crazy lifestyle.  We have a Lexus but it is 10 years old and and we bought it used.  We drive a 6 year old Kia Hybrid also bought used. And regarding hiring other people to do stuff for us, the only thing we have people do that I can think of is large home improvement projects (I'm definitely not the handiest guy, but do try to do small things myself.  I even installed programmable thermostats which I was really proud of even though it actually wasn't hard at all.). And I have someone help me with fall cleanup every other year. Besides that, I cut my own lawn, do spring cleanup and take care of the landscaping.  My wife cleans the house herself and we don't have a maid or cleaning person. I guess you could say we hire people to cut our hair.  And obviously the Au Pair for childcare.  And we had an electrician fix some things in our house.  But really we don't outsource most of the daily housekeeping work.  We do almost everything ourselves.  As for shopping, we literally never "go shopping".  My wife buys some clothes sometimes (included in the $115 per month), we buy some random stuff on Amazon sometimes, and I buy beer/liquor.  I never buy clothes.  I'll typically ask for underwear and undershirts for my birthday or Christmas.  And maybe I'll also get a new work shirt or two for those holidays. 

I'm hoping you're wrong about future expenses rising.  I mean I see a reduction of spending of about $2,000 a month in three years, from daycare savings alone.  Then, also our gas budget, groceries, utilities, insurance, car repairs should go down as well as soon as the Au Pair leaves. 

Right now, my projections say we will be able to retire at 53 and that assumes we will never collect Social Security.  Hopefully with a few raises, a decent number of spending cuts due to these recommendations, and collecting Social Security, we won't be too far off that number.  Ideally I'd love 45, but as of now that's a pipe dream.

Again, appreciate all the suggestions.  Good stuff.

« Last Edit: June 21, 2018, 12:14:21 PM by Jadambomb »

Jadambomb

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I don't know how pre-K works; how many hours a day/week are the kids there?

You can choose different schedules but ours is five days a week.  8:30 - 1. It's also basically the cheapest one in town for that schedule.

Bracken_Joy

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Rather than change your goal posts, I would encourage you to change your spending and see if you can meet that stretch goal =) A great way to start is the Frugalwoods Uber Frugal Month. I think you need to work on identifying what is really WORTH it to you. Are you measurably happier flying to vacations, vs taking a road trip? With how you eat? Etc. The Uber Frugal Challenge is a good way to learn to talk to your wife about it, discuss your goals, and determine what expenses you value. All the dollars you spend should be high value spending. http://www.frugalwoods.com/2018/06/19/the-uber-frugal-month-group-challenge-is-back-join-us-starting-july-1/

Jadambomb

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The thing that jumps out at me is $12,000/year for home improvements and remodeling.  Can you slow down your home improvements?  Is your home safe and functional?  You are just throwing money at this and you should both meditate on the money vs. the value for money you are getting.  I bet your house is already nice.

You're totally correct.  No argument from me here.  I love our house as is.  It's pretty damn nice.  I mean would I "like" a nicer bathroom, kitchen? Yes, but if it were just up to me, I'd save the money.  This budget is mostly for my wife.  We both are kind of in agreement on the patio but that's literally the last thing I'd do.